Energizer Holdings Stagnation: Is the Battery Giant Fizzling Out?

Chicago, Illinois – Energizer Holdings, Inc. made headlines in 2018 with its plan to acquire the battery business of Spectrum Brands, setting the stage for a potential battery industry powerhouse. The anticipated synergies and market power were expected to drive a stronger business, but concerns arose due to stagnant growth and a high leverage ratio. Fast forward to the present, stagnation remains a primary concern, despite attractive adjusted earnings multiples.

In early 2018, Energizer announced a significant $2.0 billion deal to acquire Spectrum’s battery and portable lighting business, including popular brands like Varta and Rayovac. The deal, valued at $866 million in sales and $169 million in adjusted EBITDA, aimed to capitalize on cost synergies of $80-$100 million, making the multiples more appealing. The acquisition positioned Energizer as a key player in the battery market, with sales exceeding $2.5 billion and a robust profitability outlook.

However, between 2018 and the fall of last year, Energizer faced challenges in sustaining its growth trajectory. While announcing the acquisition of Spectrum Brands’ global auto care business in a $1.25 billion deal, Energizer’s 2023 sales experienced a 3% decline to $2.96 billion. Despite efforts to drive earnings through synergies, adjusted EBITDA fell below pro forma numbers, leading to continued margin pressures and substantial net debt.

Looking ahead to 2024, Energizer anticipates flat to declining sales, with a modest improvement in EBITDA driven by cost savings measures. Despite these initiatives, the company faces a shortfall in first-quarter sales for 2024, projecting a decline of 6-8% on an organic basis and adjusted earnings of $0.50-$0.60 per share. The company’s struggle to combat declining sales and leverage ratios remains a key concern for investors.

At present, Energizer trades at a low multiple of 9 times earnings, reflecting intrinsic challenges in organic growth and cost exclusions in adjusted earnings. The company’s substantial net debt exceeding market value, coupled with ongoing legal challenges, pose additional risks to its financial outlook. As investors weigh the company’s cheap valuation against its operational hurdles, the road ahead for Energizer Holdings, Inc. remains uncertain in the face of industry headwinds.